| Executive Summary Medical billing in 2026 is no longer just about submitting clean claims; it’s about keeping up with rapidly changing laws that directly limit how and what you can collect. While no single “Medical Debt Forgiveness Act” exists yet, federal proposals, the No Surprises Act, and aggressive state-level laws, especially in California, are reshaping the entire revenue cycle. The system is shifting toward patient protection. If your billing workflows don’t adapt, even small compliance gaps can delay payments or make balances impossible to collect. Key Takeaways • There is no single federal Medical Debt Forgiveness Act yet, but multiple proposals and CFPB rules are already influencing patient expectations and billing practices • The No Surprises Act limits surprise billing, especially for emergency and out-of-network care at in-network facilities • California goes further than federal law, with stricter rules on surprise medical billing, collections, and credit reporting • You cannot report medical debt to credit bureaus in California; one mistake can void the entire balance •Collection timelines are shrinking, with strict deadlines like 12 months to take legal action in California • Financial assistance screening is no longer optional; it’s required in many states before collections begin • Other states (North Carolina, New Jersey, Minnesota) are following similar trends, limiting collections and expanding patient protections • Future federal laws could restrict collections even more, including banning the recovery of certain existing debts • Your best defense is proactive billing: accurate claims, early patient communication, and compliant workflows |
You see 20 patients a day, each with their own needs, routine checkups, minor procedures, or chronic wound care. You follow your billing protocols, chart everything carefully, and submit claims promptly. Yet somehow, denials keep rolling in, patients are calling upset about bills, and your front desk is stuck in an endless loop of explanations and reminders.
What’s happening?
Simply, the rules around medical billing and debt collection in the U.S. are changing fast. New federal and state laws are redefining what you can collect, when you can send accounts to collections, and how credit bureaus can report medical debt.
If you’re practicing in California, these rules are even stricter.
We will give you straight answers to all your concerns on what the medical debt forgiveness act push means for your practice, what the No Surprises Act actually covers, and what medical billing laws in California require from you.
What is the medical debt forgiveness act?
You might hear patients mention the “Medical Debt Forgiveness Act” and wonder if it means they don’t have to pay you.
Here’s the reality: no single federal law exists yet under that name. Instead, the term refers to bills and rules Congress and Federal agencies have been pushing in recent years.
Three specific actions define where things stand right now:
- The Medical Debt Relief Act of 2023 (H.R. 6003 / S. 3103):
- Prevents credit bureaus from putting medical debt on a patient’s credit report.
- Directs the CFPB to stop lenders from using medical debt when evaluating loans.
- Status: Introduced in 2023 and referred to committee; not signed into law.
- The Medical Debt Cancellation Act (S. 4289, 118th Congress):
- Would allow the federal government to pay off hospital-held medical debt via HHS grants.
- Within 2 years, it could expand to physician practices and other providers.
- Status: Referred to Senate HELP Committee; not passed.
- If enacted, this would apply nationwide, not just in California.
- CFPB Final Rule on Medical Debt and Credit Reports (January 2025):
- Finalized by the Consumer Financial Protection Bureau, this rule aimed to remove $49 billion in unpaid medical bills from the credit reports of 15 million Americans.
- Status: Currently tied up in federal court.
Even though none of these is law yet, patients increasingly expect debt forgiveness or reporting limits. Billing strategies must account for this shift.
How big is the medical debt problem?
Think about the patients sitting in your waiting room right now. Statistically, more than a third of them are carrying unpaid medical bills from somewhere.
According to a February 2024 report by the Kaiser Family Foundation (KFF), people in the U.S. owe at least $220 billion in medical debt total.
A 2024 CFPB study published in Health Affairs Scholar found that;
- 36% of U.S. households had medical debt,
- 21% had a past-due bill
- 23% were actively paying off a medical bill over time to a provider.
- $194 billion in medical debt was actively in collections.
Nonprofit organization Undue Medical Debt reported in June 2025 that 100 million people in the U.S. carry medical debt, and 30 million families borrowed an estimated $74 billion last year alone just to pay medical bills.
This is why Congress keeps trying to pass medical debt legislation, and why states stopped waiting and passed their own laws.
Patients are aware of their rights, and states are acting faster than Congress. You also have to upgrade your collection strategy to keep pace.
The No Surprises Act: what it covers and what it doesn’t
The No Surprises Act was passed by Congress in December 2020. It went into effect on January 1, 2022. This is the main federal billing protection law that’s actually in force right now. It directly targets surprise billing situations where patients unknowingly receive out-of-network care.
As a physician, here’s what you need to know in plain terms.
What you cannot do under the No Surprises Act
You cannot charge a patient more than their in-network cost-sharing amount in these 4 situations:
- You provide emergency services at any facility, whether or not you’re in the patient’s insurance network, and without needing prior authorization first
- You’re an out-of-network provider seeing a patient at an in-network facility for non-emergency care (for example, you’re an anesthesiologist at a surgery center that’s in the patient’s network, but you’re not)
- You’re providing ancillary services like radiology, pathology, or surgical assistance at an in-network facility
- You’re providing air ambulance services out-of-network
In all four cases, the patient pays only their in-network copay, deductible, or coinsurance, nothing more.
Where the No Surprises Act has gaps
The federal law does not cover:
- Ground ambulance services. This is a known gap that several states have filled on their own
- Patients on Medicare, Medicaid, TRICARE, VA, or Indian Health Service, those programs have their own rules
- Cases where you gave the patient written notice at least 72 hours ahead of time, and they signed a consent form agreeing to out-of-network care (you cannot use consent forms for emergencies or for ancillary providers like anesthesiologists)
For California, it is slightly different. It covered the roughly 6 million Californians in self-funded employer health plans, people who weren’t covered by California’s stricter state laws.
No Surprises Act California
Medical billing laws in California go further than federal laws.
If you practice in California and you think the federal No Surprises Act is all you need to follow, it isn’t. California’s billing rules are tighter than the federal ones, especially around surprise medical billing, and they cover most of your patients.
Here’s what’s different in California specifically.
- AB 72 (2017): Stops balance billing by out-of-network providers at in-network hospitals
- AB 716 (Jan. 2024): Protects patients from out-of-network ground ambulance charges; delays collections for 12 months; caps uninsured rates at Medi-Cal/Medicare rates
- 2025 Credit Reporting Ban: No California provider (or collector) may report medical debt to a credit bureau, ever. Violating this voids the debt.
This protects about 14 million Californians in fully insured, state-regulated health plans.
What this means practically:
- The patient pays only their in-network cost-sharing amount, even if the ambulance company is out of network
- Out-of-network ambulance providers must wait at least 12 months before sending the account to collections or reporting it to a credit bureau
- Uninsured patients’ costs are capped at the higher of the Medi-Cal or Medicare rate, not the full sticker price
There is one important limit that you must know if you’re practicing in California:
AB 716 does not protect the roughly 6 million Californians in self-funded employer health plans. Those patients still fall under federal law, which still has the ground ambulance gap.
California Medical Debt Collection Laws: the 4 rules you must follow
Imagine you’re expecting a payment of $1,200 for the patient you treated last month, and you find out that the entire $1,200 balance is gone and you can’t collect a single dollar of it, because:
A required notice wasn’t sent before collections.
It can happen if you’re working in California. In California, your billing process is governed by some of the strictest medical debt laws in the country. It is important for you to fully understand and implement them, because one misstep can make a patient’s debt legally uncollectable.
Here are the four rules that control what you can and cannot do when collecting unpaid balances in California:
Rule 1: 12-month window to sue
- If a patient owes you money and you want to take legal action, you must file within 12 months of the first billing date.
- After that, the debt is no longer enforceable in court.
Your usual collection timeline might be longer, but in California, waiting too long can completely eliminate your right to collect.
Rule 2: full billing information before collections
- Before turning an account over to a collection agency, California hospitals (and by extension many providers) must provide patients with an itemized bill and information about financial assistance programs.
- Skipping this step can make your collection efforts legally void.
Ensure your billing software flags accounts that haven’t been sent a complete Good Faith Estimate or financial assistance notice before collections.
Rule 3: automatic discounts for low-income uninsured patients
- Patients with household incomes ≤400% of the federal poverty level qualify for income-based discounts.
- For example, a family of four earning up to about $62,000 may receive a 100% discount on hospital bills.
Even if a patient technically owes money, the law requires these discounts, and failing to apply them can lead to legal and reputational issues.
Rule 4: no credit reporting of medical debt (starting jan 1, 2025)
- Medical billing laws in California completely ban reporting medical debt to credit bureaus, including by your own billing department.
- Penalty for noncompliance: If you report a patient’s debt, it legally disappears, and the patient no longer owes anything.
Audit your billing software and collections workflow to ensure no automatic reporting occurs.
What other states are already doing?
While Congress debates a federal medical debt forgiveness act, several states have already passed their own programs. This matters because some of these affect how debt on your books gets resolved, sometimes without your input.
- In North Carolina, the state’s Medical Debt Relief Program has already wiped out more than $6.5 billion in medical debt for over 2.5 million people, including Medicaid patients with debt going back to 2014. If your hospital or practice participates, you have to follow new charity care rules and stop aggressive collection practices.
- In Minnesota, the Debt Fairness Act took effect in October 2024. That means you can’t deny a patient care just because they have an unpaid bill, you can’t report their medical debt on a credit report, and you can’t hold a spouse responsible for the patient’s debt.
- New Jersey rolled out its Medical Debt Relief Act in July 2024. Here, you can’t report medical debt to a credit bureau if the care happened after that date, and you must wait at least 120 days before trying to collect.
The pattern is the same in every state that’s moved ahead. You have longer wait times before collections, limits on credit reporting, and mandatory charity care screening upfront.
If you practice across multiple states, you need to know these rules so you don’t accidentally lose a balance you could have collected.
What would the Medical Debt Cancellation Act mean for your practice?
The Medical Debt Cancellation Act (S. 4289) is the most aggressive federal proposal on the table. If it ever passed, it would completely change how you can collect medical debt.
Some of the rules could make it feel like you can’t touch certain balances at all, and patients would have legal backing if you tried.
- The federal government would buy and cancel hospital-held debt for U.S. patients through an HHS grant program.
- You and your billing team couldn’t collect any debt that existed before the law went into effect.
- Patients could sue you if you tried to collect debt that the law forgave.
- Within 2 years, the program would expand beyond hospitals to include physician practices like yours.
- You’d have to screen every patient for financial assistance at least 45 days before payment is due.
This bill has not passed. It stalled in the 118th Congress and faces long odds in the current Congress. But the 45-day financial assistance screening requirement is already the standard in states like North Carolina and New Jersey.
So if you get that process in place now, it will be a smart move, regardless of what Congress does.
| 5 questions you need to ask your billing team right now You don’t have to memorize every law, but your billing team must get these 5 things right today: Are you giving patients a Good Faith Estimate before scheduled services? Your patients must get a written estimate before their appointment. If the final bill exceeds it by $400+, collections pause while it’s reviewed. Are you screening patients for financial assistance before sending accounts to collections? In California, this is required by law. Nationwide, nonprofit hospitals must have a charity care policy and apply it before collections start. Has your billing software stopped sending California accounts to credit bureaus? If your system reports overdue accounts automatically, stop it immediately. One mistake can make the entire balance legally uncollectable. Are your collection timelines correct for each state? California: 12 months to sue New Jersey: 120 days before collection North Carolina (participating hospitals): 2 years before pursuing older debt. Can patients easily find your financial assistance policy? It must be available before or at the point of care. Buried policies may not hold up legally, and could block collections.Getting these 5 things right doesn’t just protect you legally, patients who know what they owe and see you offer help pay more often and dispute less. |
We make sure you get paid for every claim
In 2026, patients are gaining more protections, and your window to collect through traditional methods is shrinking fast.
The smartest way to protect your practice? Accurate billing the first time, quick financial assistance screening, and real payment plan conversations, not relying on credit bureau threats that could backfire.
If denials are piling up, or you’re unsure your team is fully compliant with the No Surprises Act, California AB 716, or the 2025 credit reporting ban, We can help.
We specialize in physician billing compliance and revenue recovery, so you can focus on patients instead of paperwork.
Contact us to get your billing reviewed today.
Frequently Asked Questions
- Has the Medical Debt Forgiveness Act been passed into federal law?
No. It remains proposals in Congress; CFPB rules are challenged. States like California, New Jersey, North Carolina, and Minnesota have passed their own strong laws.
- Does the No Surprises Act cover every billing dispute in California?
No. It covers emergencies, out-of-network at in-network facilities, and air ambulances, but not ground ambulances or cases where patients knowingly choose out-of-network care.
- Can California providers still use collection agencies for unpaid bills?
Yes, but you cannot report debt to credit bureaus. Agencies may request payment, and legal action must occur within 12 months from the first billing date.
- How is surprise medical billing in California different from the federal standard?
California covers ground ambulances, sets a 125% Medicare out-of-network payment floor, and fully bans medical debt credit reporting, much stronger than the federal rules.
- What happens to a California patient’s debt if it gets forgiven? Can it come back?
No. Forgiven debt is gone permanently. Reporting forgiven debt violates the law, making the balance void and unenforceable, with no ability to restart collections.
